Lean times: The new normal

School closings. Library cutbacks. Teacher layoffs.

The drumbeat of jolting headlines is sure to persist in Mecklenburg County and North Carolina as governments wrestle with their new economic reality: shrinking revenue.

"I'm afraid that these battles are going to continue," says Mark Vitner, a senior economist with Wells Fargo. "We have to readjust our expectations about how much our income is going to rise over our lifetimes, how much our community's income is going to rise and how much our nation's income is going to rise."

Leaders long accustomed to the challenges of managing growth now find themselves with a more painful task -- managing contraction in a still-struggling economy.

The pain, bared last week in the tumult that accompanied the vote to close 10 Charlotte-Mecklenburg schools, could go deeper at all levels of government:

The school closings are expected to save $3.6 million next year. But the system faces additional cuts of as much as $100 million.

After years of rapid growth, Mecklenburg County's property tax base is virtually flat. Sales taxes, which make up about a third of its revenue, fell more than $30 million this year.

The decline also hits Charlotte transit. Officials say a dedicated half-cent tax can no longer sustain light-rail expansion.

With the end of federal stimulus money, the state of North Carolina will lose $1.6 billion. It would lose another $1.6 billion with the end of temporary taxes on sales and income as well as so-called one-time revenues, according to legislative analysts.

Greeting lawmakers in January will be a hole of at least $3.2 billion in a $20.5 billion budget.

A federal debt-reduction panel co-chaired by Charlottean Erskine Bowles last week outlined a plan that includes making deep cuts in domestic and military spending, ending popular tax breaks and raising the retirement age for Social Security.

"It's the same message from federal government all the way down," says county manager Harry Jones. "We can't afford the government that we have now."

Less income, less taxes

According to Vitner, the main reason for the decline in government revenues is what he calls "the monster-sized output gap." At current unemployment levels, Americans produce nearly $1 trillion less than they did at a time of relatively low unemployment.

The less production, the less tax income.

The gap "dwarfs anything we've seen," he says. "It's going to take the better part of a decade to close it." Even then, he added, growth won't be nearly as dramatic as it was.

John Hood, president of the conservative John Locke Foundation, says there's no "magical revenue machine around the corner."

"The fundamental problem is we have more government than we can afford," he says. "So our political leaders have to reconcile the revenues and expenditures by setting priorities. Everybody else has to."

Bill Brawley agrees. The newly elected Matthews Republican will be part of a GOP House majority that is taking a sharp knife to Raleigh.

"We only have so much money," he says. "We have to prioritize the spending. If that means some things that had been funded aren't, it's unfortunate. But it's not something over which we have control."

Chris Fitzsimon, executive director of the progressive NC Policy Watch offers another view:

"It's a false proposition to say we have no choice -- we have lots of choices," Fitzsimon says. "If we continue to allow people to make decisions largely on an ideological basis -- that government is bad -- we're going to have a lot more schools closed and a lot more vital institutions damaged."

In a memo headlined, "Back To The Nixon Years," the liberal NC Justice Center argued that a "cuts-only" approach could push state spending to its lowest level as a share of personal income since 1972.

Director Alexandra Sirota says lawmakers could preserve key services through a balanced approach of targeted spending cuts and revenue reforms including widening the sales tax base and closing corporate loopholes.

Changing expectations

Places like Charlotte-Mecklenburg will rebound, experts say.

Joel Kotkin, an author who writes about social and economic change in cities, has said the area's core attributes remained despite hits to its two biggest banks. Others hope the area's identity spreads to include health care and energy in addition to finance.

But at least in the near term, any cuts in the state and national budgets are sure to trickle down.

Charlotte-Mecklenburg schools, for example, get almost two-thirds of its money from the state. And nonprofit groups that get money from the county could get caught in a squeeze.

"Suppose (the state) says, 'Mecklenburg County, we'd like you to pick up $2 million more -- we don't have a cushion," says Hyong Yi, the county's management and budget director.

Cuts have social costs. The school closings aggravated racial tensions.

A community can "maintain connections and build connections... during times of stress or be polarized and divided," says Dianne English, director of Charlotte's Community Building Initiative.

For public officials, the key is transparency and candor, says commissioners' chair Jennifer Roberts.

"People recognize it because they're doing it in their own household," she says of spending restraints. "It's really about not sugar-coating things and being accessible."

Jones, the county manager, says governments should adapt to leaner times. And not just in the short run.

"The fundamental question is, 'Do you want to be going back to doing business the way we did before the Great Recession?'" he says. "I say the answer is no because next time we have a downturn... we're going to have the same results.

"It's a challenge for me. It's a challenge for the commissioners. It's a challenge for the citizens. People have come to expect the services we provide."